As David Sanger of the New York Times wrote of the Bush FY 2007 budget proposals:
"The budget bears all the hallmarks of the Bush presidency, putting national security and tax cuts above all other considerations and gradually tightening or reducing spending on programs, including educational loans, farm subsidies and national parks." See Bush's $2.77 Trillion Budget Calls for Medicare Cuts.
Thus it should not be surprising to anyone that Mr. Bush has again trotted out budget breaking privatization "reforms" for Social Security. In spite of a State of the Union speech proposing a bipartisan commission to consider ways to ensure Social Security's solvency for years to come, the FY 2007 budget proposals include a plan to privatize Social Security at a cost of $700 billion (over the first seven years). See this report on OMB Watch. Although little noticed in the media, the plan would provide for workers to divert funds to private accounts beginning at $1,100 in 2009 and increasing by $100 increments through 2016.
Congressman Steny Hoyer (D-Md) had this to say about the reappearance of Bush's privatization plan.
“This is absolutely stunning. ... Last year, the country emphatically rejected the President’s effort to privatize this critical program. Instead of working in a bipartisan fashion to find a common sense solution to Social Security’s solvency, the President’s budget embraces an ill-advised, unpopular plan that would turn a guarantee into a gamble.” Hoyer Budget Release.
For other commentary on Bush's "stealth" Social Security privatization proposal, see this Washington Post article; this report on SeniorJournal.com, which provides links to the Social Security section of the budget document; and this brief report at PAFCO education fund.
The FY 2007 budget also proposes reductions in Social Security benefits by $2.2 billion over five years and $6.3 billion over the ten-year budget period. See this report on the FY 2007 budget from the Center for Budget and Policy Priorities. If the budget proposals are carried out as planned, 1,900 Social Security Administration positions nationwide would be cut through attrition, possibly hampering the SSA's ability to respond appropriately to changes in status of eligible retirees. See this report. The CBPP report notes additional changes that could hurt vulnerable populations, including elimination of the lump-sum death benefit of $255 that can help families pay for funerals and an apparently rigid requirement that school-age children attend school in order to receive benefits, even if there were reasonable cause for the children to miss school, such as mental disability. Grassley, Chair of the Senate Finance Committee, made clear that those heartless changes had no chance of passage. See this Social Security News report and the linked AP report.
(The CBPP report, by the way, is well worth reading beyond its section on Social Security. It provides a good overview of the budget proposals, and a noteworthy evaluation of the various ways in which these budget proposals are deceptive as to their ultimate impact on the U.S. economy.)
The Bush Social Security privatization plan is old wine in new bottles. The Cato Institute, of course, has been pushing privatization of Social Security for a decade. See, e.g., this 1997 Cato Institute piece proposing that all workers 32 and under divert almost 50% of their Social Security taxes into private accounts, with the shortfalls in paying benefits to be made up by additional federal debt.
The solution to the health care and retirement needs of Americans will not be found in programs that merely transfer risk to workers while putting more money in the pockets of the wealthiest Americans. Instead, Congress and the White House should work together to find a reasonable solution to fund the needs of Social Security beneficiaries in the years to come. The most obvious one is to increase or eliminate the cap and to have it apply to capital gains as well as to ordinary wage income. The choice is simple--reduce benefits for those who rely on Social Security as their primary income, or have better-off Americans pay their fair share of the tax burden for Social Security by paying tax at the same flat rate proportionately on all of their income that ordinary Americans pay on all of theirs. It seems clear that having wealthy Americans pay their fair share is the solution most in line with American values.
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